Retirement (Review Every Day) Flashcards
SEP
- filing requirements
- contribution limit
- participation
- establishment of a SEP
- permitted disparity?
- vesting and withdrawals
used by small business and sole proprietors
- no filing requirements
- contributions are limited to the lesser of 25% of compensation or $58,000 – ER contributions are discretionary, contribution must be made to ALL EE
- participation (> 21 yrs old, performance of service for 3 of the last 5 years, compensation of >$600)
- may be integrated with SS
- NO vesting for ER contributions
- EE can can withdraw funds in any amt
Top Heavy
DC Plan -> 60% of account balance attributable to key employees
DB Plan -> 60% of accrued benefits attributable to key employees
key employee
and it’s affect
> 5% owner
> 1% owner with compensation with excess >$150,000
Officer and Comp > $185,000
top heavy affects
DC - 3%
DB 2%
Vesting 2-6 graded or 3 year cliff
highly comp
Testing
> 5% owner
comp > $130k (top 20% election?)
testing - coverage testing and adp/acp testing
Actuary for
- DB
- Cash Balance
- Target Benefit
Annually for DB and Cash Balance
at Inception - Target Benefit Pension
SS Wage Base
$142,800
what plan(s) do or don’t allow integration?
DOES NOT ALLOW INT:
- salary deferral + ESOP
ex: 401k feature no integration
what is 403b plan eligibility?
21 and 1 yr of service
Education - may be 26
is 403b subject to payroll tax?
yes
403 b plan special catch up
permits up to additional $15,000 (max $3,000/yr) of contributions
may have completed 15 years
only applies to HER organizations (health, education, religion)
403b max deferral
19,500 EE deferral
6,500 age 50 over
3,000 special catch up
what funds can be in a 403b?
annuity contracts
mutual funds
catch up for 457b public vs private?
yes 50+ for public
no for private
457 special catch up
3 years prior to normal retirement age (plan document will say retirement age) can defer an additional $19,500
needs PRIOR UNUSED deferral
cannot include 50 and over catch up contribution when determining the 3 year catch up (or for private 457)
457f plan
INELIGIBLE
governmental and tax exempt 501c
not protected by trust
NO CONTRIBUTION LIMIT
Key Management and HC
Yes pretax and tax deferral
no catch up (b/c can put 100% $ in)
rollovers are not permitted *most NQ plans cannot do rollovers except for some 457 gov plans
SIMPLE - employer yearly contribution
The employer’s yearly contribution can be either a matching contribution up to 3% of compensation or a 2% nonelective contribution for each eligible employee (up to $290,000)
does an ER have to contribute to a SIMPLE plan?
require ER to make a min contribution to EE’s acct
what is a nonelective contribution?
ER choose to direct toward their eligible workers employer sponsored retirement plans regardless if EEs make their own contributions.
issued at the discretion of the ER and can be changed at any time
contributions of this type can gain an ER IRS safe harbor protection
requirements for an EE to qualify for a SIMPLE
EE who received $5,000 or more in compensation from an EE during any 2 previous calendar year
403b vesting schedule
100% at all times for contributions and earnings
does 403b allow in service withdrawals?
are loans permitted?
Yes (regular qualified plan rules on loans if plan permits)
generally no in service withdrawals, except hardships, which are plan specific
403b catch up?
50+ yrs old can permit $6500 catch up and extra $3,000 for 15 yr rule catch up
how someone can qualify for long service catch up for 403b
the business has to be a Health, Education, or Religious Organization (HER)
Jake established a traditional IRA five years ago at a local financial institution. He is considering the purchase of a limited partnership interest with his IRA funds. A CFP® professional would inform him that some of the income earned by the limited partnership may be taxable to Jake because of which rules?
A. Front-loading.
B. Prohibited IRA investments.
C. Unrelated business taxable income.
D. At Risk Rule.
Solution: The correct answer is C.
Unrelated business taxable income is often reported on limited partnership K-1s. This would potentially cause some of the partnership earnings to be taxable currently, even though the partnership interest is held inside an IRA.
